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PETITIONER: O.P. BHANDARI

       Vs.

RESPONDENT: INDIAN TOURISM DEVELOPMENT CORPORATION LTD. & ORS.

DATE OF JUDGMENT26/09/1986

BENCH: THAKKAR, M.P. (J) BENCH: THAKKAR, M.P. (J) NATRAJAN, S. (J)

CITATION:  1987 AIR  111            1986 SCR  (3) 923  1986 SCC  (4) 337        JT 1986   586  1986 SCALE  (2)523  CITATOR INFO :  F          1988 SC 286  (5,6)  R          1990 SC1054  (23,24)  F          1991 SC 101  (21,45,182,223,263)

ACT:      Indian  Tourism   Development   Corporation   (Conduct, Discipline  and   Appeal)  Rules,   1978:   Rule   31(v)   - Constitutional validity of-Termination of Services by giving ninety days’ notice or pay in lieu thereof-Whether violative of Articles 14 and 16(1).      Labour  and   services-Public  Sector  Undertaking-High Managerial  cadre-Services   of-Illegal   termination-Relief against-Reinstatement  or  compensation-Court’s  discretion- Quantum of  compensation Factors  to be considered. Employee entitled to  relief under  s. 89  of the Income-tax Act read with r. 21-A of the Income-tax Rules.      Constitution of  India, Articles  12, 14,  32 and  226- Public Sector  Undertaking-A ’State’-  High managerial cadre and  employees-Differential   classification  under  service rules-Whether permissible.

HEADNOTE:      Rule  31(v)   of   the   Indian   Tourism   Development Corporation (Conduct,  Discipline and  Appeal)  Rules,  1978 provides that the services of an employee, who had completed his probationary period and who has been confirmed or deemed to be  confirmed, may  be terminated  by giving him 90 days’ notice  or   pay  in  lieu  thereof.  The  services  of  the appellant, who was an employee of the respondent-Corporation holding the  post of Manager of a Hotel at the material time were terminated  by Memorandum  No.  P-B(OP)-22  dated  18th September, 1984,  in exercise  of the  powers under the said rule by  giving him  pay for three months in lieu of notice. Aggrieved by  the said  order the  appellant  filed  a  writ petition in  the High  Court  assailing  the  constitutional validity of  r. 31(v) of the said Rules, which was summarily dismissed.      Allowing the appeal by special leave, the Court, ^      HELD: 1.  The Indian Tourism Development Corporation is an

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924 instrumentality of  the State and, therefore, ’State’ within the parameters  of Article  12 of the Constitution of India. [927D-E]      Central Inland  Water Transport Corporation Ltd. & Anr. v. Brojo Nath Ganguly & Anr., [1986] 3 S.C.C. 156 applied.      2.1  Rule  31(v)  of  the  Indian  Tourism  Development Corporation (Conduct, Discipline and Appeal) Rules, 1978, is unconstitutional and  void, for  such a  rule which provides for termination  of the  services of  the employees  of  the respondent-Corporation simply  by giving ninety days’ notice or by  payment of  salary for  the notice  period in lieu of such notice,  cannot co-exist  with Articles 14 and 16(1) of the Constitution of India. The fundamental right embedded in these Articles  is not  a mere  paper tiger  nor  is  it  so ethereal that  it can  be nullified  or eschewed by a simple device of framing a rule which authorises termination of the services of  an  employee  by  merely  giving  a  notice  of termination. [930D-E;928F;929F]      2.2 The  tenure of  service of  a citizen  who takes up employment with  the State  cannot be  made to depend on the pleasure or  whim of the competent authority unguided by any principle  or   policy,  nor  his  services  allowed  to  be terminated  on   an   irrational   ground   arbitrarily   or capriciously.  The   authorities  cannot  be  invested  with uncontrolled   discriminatory    power   to    practise   on considerations not  necessarily based  on the welfare of the organisation  but  possibly  based  on  personal  likes  and dislikes,    personal     preferences    and     prejudices. Provincialism, casteism, nepotism, religious fanaticism, and several other  obnoxious factors  may in  that  case  freely operate on  the mind  of the competent authority in deciding whom to retain and whom to get rid of. And these dangers are not imaginary ones. They are very much real in organisations where there  is a  confluence of employees streaming in from different States.  Such a  rule as  in the  instant case, is capable of  robbing an  employee of  the dignity, and making him a  supine person  whose destiny  is at  the mercy of the concerned authority.  The impugned rule, therefore, deserves to be quashed. [928H; 929A-B; D-F]      Central Inland  Water Transport  Corporation Limited  & Anr. v.  Brojo Nath  Ganguly &  Anr., [1986]  3 S.C.C.  156; State Electricity  Board v.  D. B.  Ghosh, [1985]  2  S.C.R. 1014, referred to.      3.1 The  Court has  full discretion  in the  matter  of granting relief  to suit the needs of the matter at hand. If satisfied that  ends of  justice so  demand, the  Court  can certainly direct that the employer shall have the 925 option  not   to  reinstate,   provided  the  employer  pays reasonable compensation as indicated by it. [932G]      3.2 In  the sphere  of employer-employee  relations  in public sector  undertakings, to  which  Article  12  of  the Constitution of  India is  attracted, it  cannot be  posited that reinstatement  must invariably  follow as a consequence of holding  that an  order of  termination of  service of an employee is void. Though in regard to workmen and employees, reinstatement would  be a  rule, and  compensation  in  lieu thereof  a   rare  exception,  as  regards  the  high  level managerial cadre  the matter  deserves to  be viewed from an altogether different perspective. [932A-C]      3.3 The  public sector  needs to  be managed by capable and efficient  personal with unimpeachable integrity and the requisite vision,  who enjoy  the fullest  confidence of the policy makers.  It is  but  in  public  interest  that  such

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undertakings or  their Board  of Directors are not compelled and obliged  to entrust  their managements  to personnel  in whom, on reasonable grounds, they have no trust or faith and with whom  they are  in a bonafide manner unable to function harmoniously as  a team. These factors have to be taken into account  by   the  Court   at  the   time  of   passing  the consequential order. [932E-G]      In the  instant  case,  it  cannot  be  said  that  the apprehension voiced by the respondent-Corporation as regards the negative  consequences of reinstatement is unreasonable. The relations  between  the  parties  appear  to  have  been strained beyond  the point  of no return. The Trade Union of the employees  has lodged a strong protest and even held out a threat  of strike,  in the  context of  some acts  of  the appellants. Such  unrest among the workmen is likely to have a prejudicial effect on the working of the undertaking which would prima  facie be  detrimental to  the  larger  National Interest. In  such a  situation neither  the undertaking nor the appellant can improve their image or performance. It is, therefore, a  fit case  for granting compensation in lieu of reinstatement. [933A-C]      4. In  the  private  sector  the  managerial  cadre  of employees is  altogether excluded  from the  purview of  the Industrial Disputes  Act and similar labour legislations. It can cut  the dead wood and can get rid of a managerial cadre employee  in   case  he  is  considered  to  be  wanting  in performance or  in integrity.  Not so  in the  public sector under a rule similar to r. 31(v). Public sector undertakings may under  the  circumstances  be  exposed  to  irreversible damage at  the hands  of an  employee belonging  to  a  high managerial cadre on account of the faulty policy 926 decisions or  on account of lack of efficiency or probity of such an  employee. The very existence of the undertaking may be  endangered  beyond  recall.  Such  a  situation  can  be remedied by enacting a regulation permitting the termination of the employment of employee belonging to higher managerial cadre, if  the undertaking  has reason  to believe  that his performance is  unsatisfactory or  inadequate, or there is a bonafide suspicion  about his integrity, these being factors which cannot  be  called  into  aid  to  subject  him  to  a disciplinary proceeding. If termination is made under such a rule or  regulation, perhaps  it may not attract the vice of arbitrariness or discrimination condemned by Articles 14 and 16(1) of  the Constitution of India, inasmuch as the factors operating in  the case of such an employee will place him in a  class  by  himself  and  the  classification  would  have sufficient nexus  with the  object sought  to  be  achieved. [931A-H]      [Taking  into  account  various  factors,  compensation equivalent to  3.33 years’  salary (including  allowances as admissible) on  the basis  of the  last pay  and  allowances drawn by  the appellant  was determined  to be  a reasonable amount to  award in  lieu of  reinstatement, with  statutory relief under  s. 89 of the Income-tax Act, 1961 read with r. 21-A of the Income-tax Rules, 1961.] [934C-D; 936D-E]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 1969 of 1986      From the  Judgment and  order dated  26.9.1984  of  the Delhi High Court in Civil Writ Petition No. 2329 of 1984.      Govinda Mukhoty,  K.G. Bhagat and Mahabir Singh for the

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Appellant.      G.B. Pai,  O.C. Mathur,  Miss Meera Mathur, D.N. Mishra and S. Sukumaran for the Respondents.      The Judgment of the Court was delivered by      THAKKAR, J.  A CAT-scan  of this  appeal reveals  three problems, viz:           I. Whether a rule or regulation framed by a public           sector undertaking which is an authority under the           control of   Government  of India and is a ’State’           within the parameters 927           of  Article   12  of  the  Constitution  of  India           empowering the  employer to terminate the services           of an  employee by giving notice of the prescribed           period or  payment of salary for the notice period           in lieu of such notice is constitutional?           II.  If   it  is   unconstitutional,  whether  the           employee whose  services are  terminated under the           said rule  or regulation  is always and invariably           entitled to  reinstatement? Whether  option to pay           compensation in lieu of reinstatement can be given           to the employer in fit cases?           III. What  would be  the appropriate  amount to be           reason ably awarded in lieu of reinstatement?      These are  the questions which call for answers in this appeal.’      Undisputed are  the following  facts,  the  same  being incapable of being disputed:           (1)  The   respondent  Corporation  (I.T.D.C.)  is           ’State’ within the parameters of Article 12 of the           Constitution of  India it being an instrumentality           of the  State as  per the  law enunciated  by this           Court   in    Central   Inland   Water   Transport           Corporation Limited  & Anr.  v. Brojo Nath Ganguly           and  Anr.   and  Central  Inland  Water  Transport           Corporation Limited & Anr. v. Taran Kanti Sengupta           & Anr., [1986] 3 S.C.C. 156.           (2) Appellant  was an  employee of  the Respondent           Corporation holding  the post  of Manager of Hotel           Ranjit, New  Delhi, at  the material time when his           services were terminated by the impugned order.2           (3) Services  of the  Appellant were terminated in           exercise of  powers under  Rule 31 (v) of the ITDC           Conduct Discipline  and Appeal  Rules 1978,  (ITDC           rules) by 1.By Special  Leave arising  out of  W.P. No.  2329 of  1984 dismissed by  the High Court of Delhi summarily by its order dated 26.9.1984. 2. Annexure  P-10,  Memorandum  No.  P-B(OP)-22  dated  18th September. 1984. 928           giving pay  for 3  months in  lieu  of  3  months’           notice,3 under the said rule.      Rule 31  (v) of  the I.T.D.C. Rules, the constitutional validity  of  which  is  questioned  from  the  platform  of Articles 14  and  16  (1)  of  the  Constitution  of  India, provides:-           "31. Termination of services:           The services  of an  employee may be terminated by           giving  such  notice  or  notice  pay  as  may  be           prescribed in  the  contract  of  service  in  the           following manner:-           i)        X  X  X  X           ii)       X  X  X  X           iii)      X  X  X  X

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         iv)       X  X  X  X           v)        of an  employee who  has  completed  his                     probationary period  and  who  has  been                     confirmed or  deemed to  be confirmed by                     giving him  90 days’  notice or  pay  in                     lieu thereof." This rule cannot co-exist with Articles 14 and 16 (1) of the Constitution of  India. The said rule must therefore die, so that the  fundamental rights  guaranteed  by  the  aforesaid constitutional provisions  remain alive. For, otherwise, the guarantee  enshrined   in  articles   14  and   16  of   the constitution can  be set  at naught simply by framing a rule authorizing termination  of an  employee by  merely giving a notice. In  order to  uphold the  validity of  the  rule  in question it  will have to be held that the tenure of service of a citizen who takes up employment with the 3.   Memorandum No. P-B (OP)-22 dated 18th September, 1984.      "Please be  advised that  your services  are no  longer      required hence stand terminated with immediate effect.      In accordance  with rule  No. 31(v)  of  ITDC  Conduct,      Discipline and  Appeal Rule  1978, you  are hereby paid      three months  pay in  lieu of  notice and  a cheque No.      089988 dated  18.9.84 drawn on State Bank of India, New      Delhi, representing  a sum  of Rs.7,950  (Rupees  Seven      Thousand Nine Hundred and Fifty only) is enclosed." 929 State will  depend on  the pleasure or whim of the competent authority unguided  by any principle or policy. And that the services of  an employee can be terminated even though there is no  rational ground  for doing  so, even  arbitrarily  or capriciously. To  uphold this  right is  to accord  a "magna carta" to  the authorities  invested with  these  powers  to practise uncontrolled  discrimination at  their pleasure and caprice on  considerations  not  necessarily  based  on  the welfare of  the organisation  but possibly based on personal likes and  dislikes, personal preferences and prejudices. An employee may  be retained  solely on the ground that he is a sycophant and  indulges in flattery, whereas the services of one who  is meritorious  (but who  is wanting  in the art of sycophancy and  temperamentally incapable  of  indulging  in flattery) may be terminated. The power may be exercised even on the  unarticulated ground  that the former belongs to the same  religious  faith  or  is  the  disciple  of  the  same religious teacher  or holds  opinions congenial  to him. The power may  be exercised  depending on  whether  or  not  the concerned employee  belongs to  the same  region, or  to the same caste as that of the authority exercising the power, of course without  saying so.  Such power may be exercised even in order to make way for another employee who is a favourite of  the   concerned  authority.   Provincialism,   casteism, nepotism, religious  fanatism, and  several other  obnoxious factors may  in that  case freely operate on the mind of the competent authority  in deciding  whom to retain and whom to get rid  of. And  these dangers are not imaginary ones. They are very  much  real  in  organisations  where  there  is  a confluence of  employees streaming in from different states. Such a  rule is  capable  of  robbing  an  employee  of  his dignity, and  making him a supine person whose destiny is at the mercy  of the  concerned authority (whom he must humour) notwithstanding the  constitutional guarantee  enshrined  in Articles 14  and 16  of the  Constitution of  India. To hold otherwise is  to hold that the fundamental right embedded in Articles 14  and 16 (1) is a mere paper tiger and that it is so ethereal that it can be nullified or eschewed by a simple device of framing a rule which authorizes termination of the

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service  of  an  employee  by  merely  giving  a  notice  of termination. Under  the circumstances  the rule  in question must be held to be unconstitutional and void. This Court has struck down  similar rules  in similar  situations. In State Electricity Board  v. D.B.  Ghosh,  [1985]  2  S.C.R.  1014, Chinnappa Reddy  J. speaking for a three-Judge Bench of this Court  has   observed.   that   a   (similar)   regulation,4 authorizing the 4. Regulation  34 of Regulations framed by West Bengal State Electricity Board reading the 930 termination of  the services  of a  permanent  employee,  by serving three months’ notice or on payment of salary for the corresponding period  in lieu thereof, was ex facie ’totally arbitrary’ and ’capable of vicious discrimination’. And that it was  a naked  ’hire and  fire’ rule and parallel of which was to  be found  only in  the "Henary  VIII  clause"  which deserved to  be banised  altogether  from  employer-employee relationship. The regulation thus offended Article 14 of the Constitution of India and deserved to be struck down on that account.  In  Central  Inland  Water  Transport  Corporation Limited and  Anr. v.  Brojo Nath  Ganguly  and  Another  AND Central Inland Water Transport Corporation Limited & Anr. v. Tarun Kanti  Sengupta and  Anr. (Supra)  a Division Bench of this Court  has struck  down a similar rule5 in so far as it authorized termination  of employment  by serving  a  notice thereunder  as   being  violative   of  article  14  of  the Constitution of  India, inter  alia, in  as much  as it  was capable of  being selectively applied in a vicious manner by recourse to ’pick and choose’ formula.      There is,  under the  circumstances, no escape from the conclusion that Rule 31(v) of the aforesaid ITDC rules which provides for termination of the services of the employees of the respondent  corporation simply by giving 90 days’ notice or by  payment of  salary for  the notice  period in lieu of such notice,  deserves to  be quashed.  As the  occasion  so demands, we feel constrained to place in focus and highlight an  important   dimension  of   the  matter.   The  impugned regulation is  extremely wide  in its  coverage in the sense that it  embraces the  ’blue  collar’  workmen,  the  ’white collar’ employees,  as also  the ’gold  collar’  (managerial cadre) employees  of the Undertaking. In so far as the ’blue collar’ and  ’white collar’  employees  are  concerned,  the quashing does  not pose  any problem. In so far as the ’gold collar’ (managerial  cadre)  employees  are  concerned,  the consequence of quashing of the      "34. In case of a permanent employees, his services may      be terminated  by serving  three months’  notice or  on      payment of  salary for the corresponding period in lieu      thereof. " 5.   Rule 9 (i) of (Service, Discipline and Appeal) Rules of      1979 of Central Inland Water Transport Corporation Ltd.      reading:-      "9. Termination  of  employment  for  Acts  other  than      misdemeanour.  -(i)   The  employment  of  a  permanent      employee shall  be  subject  to  termination  on  three      months’ notice  on either  side. The notice shall be in      writing  on  either  side.  The  company  may  pay  the      equivalent of  three months’  basic  pay  and  dearness      allowance, if  any, in  lieu of  notice or may deduct a      like amount  when the  employee has  failed to give due      notice." 931 regulation calls for some reflection. In the private sector, the managerial  cadre of  employees is  altogether  excluded

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from the  purview of the Industrial Disputes Act and similar labour legislations.  The private  sector can  cut the  dead wood and  can get rid of a managerial cadre employee in case he  is  considered  to  be  wanting  in  performance  or  in integrity. Not  so the public sector under a rule similar to the impugned  rule. Public sector undertakings may under the circumstances be exposed to irreversible damage at the hands of a  ’gold collar’ employee (belonging to a high managerial cadre) on  account of  the faulty  policy  decisions  or  on account  of  lack  of  efficiency  or  probity  of  such  an employee. The  very existence  of  the  undertaking  may  be endangered beyond  recall. Neither  the capitalist world nor the communist  world (where  an employee has to face a death sentence if  a charge  of corruption  is established)  feels handicapped or  helpless and  countenances such a situation. Not being  able to  perform as per expectation or failure to rise to  the expectations  or failure  to measure  up to the demands of  the office  is not  misconduct. Such an employee cannot thus be replaced at all. If this situation were to be tolerated by an undertaking merely because it belongs to the public sector, it would be most unfortunate not only for the undertaking but  also for  the Nation.  The public sector is perched on  the commanding  heights of the National Economy. Failure of  the public  sector might well wreck the National Economy. On  the other hand the success of the public sector means prosperity  for the  collective community (and not for an individual Industrial House). The profits it makes in one unit can  enable it to run a losing unit, as also to develop or expand  the existing units, and start new units, so as to the generate  more employment  and produce  more  goods  and services for  the community.  The  public  sector  need  not therefore be  encumbered with  unnecessary shackles  or made lame. It  is  wondered  whether  such  a  situation  can  be remedied by enacting a regulation permitting the termination of the employment of employee belonging to higher managerial cadre, if  the undertaking  has reason  to believe, that his performance is  unsatisfactory or  inadequate, or there is a bonafide suspicion  about his integrity, these being factors which cannot  be  called  into  aid  to  subject  him  to  a disciplinary proceeding.  If termination is made, under such a rule or regulation, perhaps it may not attract the vice of arbitrariness or discrimination condemned by Articles 14 and 16(1) of  the Constitution  of India, inasmuch as the factor operating in  the case of such an employee will place him in a  class  by  himself  and  the  classification  would  have sufficient nexus  with the  object sought to be achieved. Of course it  is for  the concerned  authorities to  tackle the sensitive problem  after due  deliberation. We  need say  no more. 932      Time is  now ripe  to turn  to the  next question as to whether it  is obligatory  to direct  reinstatement when the concerned regulation  is found  to be void. In the sphere of employer-employee relations  in Public  Sector Undertakings, to  which  Article  12  of  the  Constitution  of  India  is attracted, it  cannot be  posited  that  reinstatement  must invariably follow  as a consequence of holding that an order of termination  of service  of an employee is void. No doubt in  regard  to  ’blue-collar’  workmen  and  ’white  collar’ employees other  than those  belonging to  the managerial or similar high level cadre, reinstatement would be a rule, and compensation in  lieu thereof a rare exception. In so far as the high  level managerial  cadre is  concerned, the  matter deserves  to   be  viewed   from  an   altogether  different perspective-a  larger   perspective  which  must  take  into

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account the  demands of  National Interest and the resultant compulsion to ensure the success of the public sector in its competitive co-existence with the private sector. The public sector can  never fulfil  its life-aim  or successfully  vie with the  private sector if it is not managed by capable and efficient personnel  with unimpeachable  integrity  and  the requisite vision,  who enjoy  the fullest  confidence of the ’policy-makers’ of such undertakings. Then and then only can the public sector undertaking achieve the goals of 1. maximum production for the benefit of the community, 2. social justice for workers, consumers and the people, and 3. reasonable  return on  the public  funds invested  in the undertaking.      It is  in public  interest that  such  undertakings  or their Board  of Directors  are not  compelled and obliged to entrust  their   managements  to   personnel  in   whom,  on reasonable grounds,  they have  no trust  or faith  and with whom they  are in  a  bonafide  manner  unable  to  function harmoniously as  a team  working arm-in-arm  with success in the aforesaid  three-dimensional sense as their common goal. These factors  have to be taken into account by the Court at the time  of passing  the consequential order, for the Court has full  discretion in  the matter  of granting relief, and the Court  can sculpture the relief to suit the needs of the matter at hand. The Court, if satisfied that ends of justice so demand, can certainly direct that the employer shall have the option  not to  reinstate  provided  the  employer  pays reasonable compensation as indicated by the Court.      So far  as the facts of this case are concerned, we are satisfied that 933 this is  a fit  case for  granting compensation  in lieu  of reinstatement, instead  of granting ’reinstatement’. For, it cannot  be   said  that   the  apprehension  voiced  by  the respondent-Corporation as  regards the negative consequences of reinstatement  is unreasonable.  We  do  not  propose  to pronounce on  the validity  or otherwise  of the allegations and  counter  allegations  made  by  the  parties  in  their respective affidavits.  Suffice it to say that the relations between the  parties appear to have been strained beyond the point of  no return.  The Trade  Union of  the employees has lodged a  strong protest  and even  held  out  a  threat  of strike, in  the context  of some acts of the Appellant. Such unrest among  the workmen  is likely  to have  a prejudicial effect on  the working  of the undertaking which would prima facie be detrimental to the larger National interest, not to speak of detriment to the interest of concerned undertaking. We are  not impressed  by the  submission that  the Union is virtually a  ’company’s Union.  In any  case  such  disputed questions of  facts cannot be resolved in this forum. We are prima facie  satisfied that  the apprehension  is  not  ill- founded. What  is more, reinstatement is perhaps not even in the interest  of the appellant as he cannot give his best in the less-than-cordial-atmosphere  and it will also result in misery to  him,  let  alone  the  other  side.  Neither  the undertaking nor  the appellant  can improve  their image  or performance, or,  achieve success.  In fact it appears to us that both  sides will  be unhappy  and miserable.  These are valid reasons  for concluding  that compensation  in lieu of reinstatement, and  not reinstatement,  is warranted  in the circumstances of the present case.      Counsel for the appellant having forcefully pressed the claim for  reinstatement, has  contended that  in  case  the Court is  disinclined to  order reinstatement, the appellant ought to  be awarded  the full  salary and  allowances which

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would  have   accrued  to   him  till   the  date   of   his superannuation which  is more than 8 years away. We think it would  be   unreasonable  to   award  8  years’  salary  and allowances,  as   lump   sum   compensation   in   lieu   of reinstatement. We consider it unreasonable because:-           (i) To  do so  would tantamount  to paying  to the           appellant EVERY  MONTH 20%  OVER AND ABOVE what he           would have  earned if  he was continued in service           WITHOUT DOING  ANY WORK as the lump sum payment of           8 years’ salary invested at 15% interest (it being           the  current  rate  of  interest)  would  yield  a           monthly recurring amount equivalent to his current           monthly salary ’plus’ 20%; 934           (ii) To do so would be tantamount to paying to him           his present  salary etc. plus 20% more every month           not only  till his date of retirement but till his           death (if  he lives  longer) and also to his heirs           thereafter, IN PERPETUITY.           (iii) Besides, the corpus of the lumpsum amount so           paid as  compensation would  remain with  him  in-           tact. Obvious it is, therefore, that the Court would be conferring a ’bonanza’  on him  and not  compensating him  by accepting this formula.  The submission,  accordingly, deserves  to be repelled unhesitatingly.      In our  considered opinion,  compensation equivalent lo 3.33 years’  salary (including  allowances as admissible) on the basis  of the  last pay  and  allowances  drawn  by  the appellant would  be a  reasonable amount to award in lieu of reinstatement taking  into  account  the  following  factors viz:-      1. The  corpus if  invested at  the prevailing  rate of interest (15%)  will yield  50% of  the  annual  salary  and allowances. In  other words  every year  he will  get 50% of what he  would have  earned by  way of salary and allowances with four additional advantages:           (i)  He   will  be  getting  this  amount  without           working.           (ii) He  can work  somewhere  else  and  can  earn           annually whatever  he is  worth  over  and  above,           getting 50% of the salary he would have earned.           (iii) If  he had  been reinstated  he  would  have           earned  the   salary  only   upto  the   date   of           superannuation (upto  55, 58 or 60 as the case may           be) unless he died earlier. As against this 50% he           would be  getting annually  he would  get not only           beyond the  date  of  superannuation,  for  his  &           lifetime (if  he lives longer), but even his heirs           would get it in perpetuity after his demise.           (iv) The  corpus of lump sum compensation would re           main intact, in any event. No  doubt   he  will  not  have  the  advantage  of  further promotion, but 935 then what are his prospects, given the present relationship? Besides, the chances of promotion can be set off against the risk of a departmental disciplinary proceeding. Factors (i), (ii), (iii)  and (iv)  are of  such great  significance that compensation on  the basis  of 50%  of his annual salary and allowances is  much more  to  his  advantage.  We  are  thus satisfied that  compensation in lieu of reinstatement on the aforesaid basis  is more  than  reasonable.  We.  therefore. direct that:      I --  The Respondent  Corporation shall  reinstate  the

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         appellant with  full back-wages  (including  usual           allowances), or, at its option,      II--  The  Respondent  Corporation  shall  pay  to  the           appellant:-           (1) Salary  including  usual  allowances  for  the           period commencing  from the date of termination of           his service under the impugned order till the date           of payment  of  compensation  equivalent  to  3.33           years’ salary including usual allowances to him.           (2) Provident Fund amount payable to the appellant           and retirement benefits computed as on the date of           payment as  per clause  1 shall  be  paid  to  him           within 3 months from the said date.      III-  The   appellant  shall   vacate  and   make  over           possession  of   the  premises   provided  to  the           appellant by  the respondent  company  before  the           expiry of  3 months from the date of this order or           within one month of the day on which payment under           clause II is made, whichever is later.      IV - Respondent shall pay the costs to the Appellant.      V --  Interim order  shall stand vacated subject to the           direction embodied in Clause III.      VI - Since the amount is being paid in one lump sum, it           is likely  that the  employer may take recourse to           Section 192  of the  Income-tax  Act,  1961  which           provides that  any person  responsible for  paying           any income  chargeable under  the head ’Salaries’,           shall, at  the time  of payment, deduct income-tax           on the amount payable at the average rate of 936           income computed on the basis of the rates in force           for the  financial year  in which  the payment  is           made, on  the estimated  income  of  the  assessee           under this  head  for  that  financial  year.  If,           therefore, the employer proceeds to deduct Income-           tax as  provided by  Section 192, we would like to           make it  abundantly clear that the appellant would           be entitled  to relief  under Section  89  of  the           Income-tax Act which provides that where by reason           of any portion of asses see’s salary being paid in           arrears or  in advance  by reason  of  his  having           received in any one financial year salary for more           than 12  months  or  a  payment  which  under  the           provisions of clause (3) of Section 17 is a profit           in lieu  of salary,  his income  is assessed  at a           higher rate than that it would otherwise have been           assessed,  the  Income-tax  officer  shall  on  an           application made  to him in this behalf grant such           relief as may be prescribed. The prescribed relief           is set  out in  Rule 21-A of the Income-tax Rules.           The appellant  is entitled to relief under Section           89 because  compensation herein  awarded  includes           salary which  has been  in  arrears  as  also  the           compensation in  lieu  of  reinstatement  and  the           relief should  be given  as provided by Section 89           of the  Income-tax Act  read with Rule 21-A of the           Income-tax Rules.  The appellant  is  indisputably           entitled  to  the  same.  If  any  application  is           required to  be made, the appellant may submit the           same  to   the   competent   authority   and   the           Corporation shall,  through  its  Tax  Consultant,           assist the appellant for obtaining the relief.      The appeal  is allowed.  The order of the High Court is set aside. Order in the aforesaid terms is passed. P.S.S.                                       Appeal allowed.

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